My Crucial Lessons from the Financial Crisis and What I'll Do Next Time

This week 10 years ago in 2008, Congress passed a revised version of the Troubled Asset Relief Program (TARP) aiming to stabilize the economy and offset bank foreclosures.

But the months of September and October 2008 still saw markets shake with turbulence. As for many financial advisors, for FT300, FT400, and FT401 top advisors David Bahnsen, Mike Abrams, and Erik Daley, the financial crisis of 2008 was a difficult time.

But by making it through the crisis, the advisors say they have gained the skills to guide their clients through the next market upheaval.

The financial crisis caused people to rethink the way they view economic security in much the same way September 11, 2001 caused people to rethink how they view national security, David Bahnsen says. And Bahnsen believes it changed how he views his business too. The Bahnsen Group is constantly preparing clients for the reality of both cyclical and unforeseen market corrections, he says. One way of doing this is by sending out weekly market updates.

During the 2008 crisis Bahnsen started proactively sending market updates to clients every Friday to ensure he was communicating with clients effectively, he says. And by actively communicating with clients during a crisis, Bahnsen believes he was even able to win new clients. “Prospecting new business during a market crash is like shooting fish in a barrel.” This is because during the 2008 crisis, the vast majority of investors were not being talked to by their advisors because “FAs were literally hiding under their desks.” This provides a golden opportunity to do new business, he says.

While Bahnsen was able to prospect for new business during the crisis, other FAs emphasize the crisis’ effect on their investment views.

Mike Abrams of Wells Fargo says following the crisis he doesn’t take many of the assumptions he took for granted anymore – including volatility and liquidity. Liquidity can dry up and volatility can go to extremes, he says. Abrams also added direct commercial real estate investments to portfolios as a direct result of the financial crisis, he says. Having an asset that is not correlated with stocks and bonds – something clients can feel, see, and touch – can help give them more comfort, rather than having a piece of paper, he says.

Direct commercial real estate investments also give clients the associated cash income that comes with them, Abrams says. Looking at how the financial crisis of 2008 helped further his overarching ability to guide clients through any future market correction, Abrams says he understands “leverage can be devastating when it goes against you.” Never let your clients be overextended or invested in anything that puts them in a position where things can collapse like a house of cards, he says.

For Erik Daley of the Multnomah Group, the financial crisis was formative in shaping what the firm has grown into today. The crisis helped prepare the firm for any future market corrections, Daley, managing principal of the $20 billion-dollar firm, says.

From the 2008 crisis the Multnomah Group learned they need to be immediately responsive to clients to contextualize what is occurring in the markets, Daley says. Multnomah has since decreased its client caseload per FA. It also provides more comprehensive education to clients and has made communication more immediate.

Over the course of the two-month period the Dow Jones Industrial Average (DJIA) dropped more than 3300 points. Here’s how these three top financial advisors remember the time ...